Tesla Worth $160, Deutsche Upgrade Says

By Dimitra DeFotis

Bloomberg

A Tesla Roadster gets a charge in Hong Kong.

Deutsche Bank analysts upgraded Tesla Motors Friday, admitting they are late to the electric car party.

Analysts Dan Galves, Rod Lache, Mike Levin and Patrick Nolan think the stock can reach $160, which implies 24% upside from the current price. They said the stock could double in the next three or four years and moved their rating to Buy from Hold.

“We have been late in recognizing that the Street would value Tesla on out-year potential and have been overly focused on the risks. Over the last few months, 5 things have changed our mind: 1) The stellar Consumer Reports review lessened our concern on quality issues that were experienced by early customers; 2) U.S. orders have risen to 20k annualized (vs 12k-13k in Q1), reducing concerns on sustainability of demand; 3) Supercharger network buildout has potential to extend and sustain TSLA’s competitive advantage; 4) We’ve become more comfortable with the walk to 25% gross margins in Q4 (in fact, we expect an upside surprise in Q2). And now see potential for 35%+ on vol’s >50k; and, 5) Based on proprietary work, we now expect the Gen3 vehicle to fully close the cost gap to non-EV competition with margins in the 25% range.”

“On 200k units (5% of TAM, potentially conservative), we believe TSLA can generate $13bn revenue, 20% EBIT margins, and $14 of EPS. Given TSLA’s head-start in a technology that we believe will enjoy a long-period of outsized growth, we believe investors would pay 20x EPS (double normal auto multiples) in the ‘16 / ‘17 period. We discount back 4 yrs to arrive at our target price of $160. Key risks are demand and quality.”

There are 5 comments

Tesla stock will look like GM in 1915....
Higher margin will be the surprise that will allow Tesla to corner the auto industry.... these autos have a battery and motor while ICE has hydraulics, emission systems, transmission, axles, etc.... more costly parts and more labor to build...

JULY 26, 2013 3:53 P.M.

jamesdan wrote:

discounting back from only 2017 leaves a lot on the table. The reason DB only goes to 2017 is that if you move out all the way to 2023 and assume EV's will gain share steadily, Tesla's stock price estimate goes off the chart...even if you cut estimates in half with 50% probability. The auto market is gigantic. No analyst in several generations has had to make an estimate for a new viable company thats gaining global share....

JULY 26, 2013 8:02 P.M.

Ozee wrote:

Good for you Deutsche Bank! What you are recognizing is clear, especially to those who matter the most: consumers. Your analysis grasps the pivotal nature of what Tesla offers the world. The demand for Tesla cars is bursting at the seems. They don’t even advertise!
It’s mostly by word of mouth! It’s to Deutsche Bank’s credit that they base their analysis on a contextually accurate, merit-based, view of Tesla’s amazingly successful innovation. The nature of Tesla, as a company and it’s product, is fundamentally different from other auto companies. Thus, projections for their accelerating expansion must be based on in-depth knowledge of their unique nature. Most other financial institutions are basing their projections for Tesla based on the past trajectory of other car companies, who are committed to gas-engine-car contracts for the vast majority of their profits and foreseable future. Why? A lens clouded by an existencial-crisis. It’s difficult to face an old industry, set in it’s ways, and inform them that a new member has prospects that far surpasses theirs. It’s hard to point out that the change that Tesla brings was due yesterday and is here to stay. It’s much easier to run away and hope that a lack of professional integrity won’t come back to bite them later. It takes people and institutions with confidence to lead through the congregation of fear. This is a tremendous advance for the automotive industry, the sustainable energy infrastructure, and, most importantly, the environment. Hopefully, other financial institutions will look through the cloud of discrimination and political fear that is preventing them from reacting appropriately to the global demand for Tesla’s amazing cars.

JULY 27, 2013 9:01 A.M.

CarOfTheFuture wrote:

Given the market is global, and the internet is an amazing form of information distribution, I think Tesla will grow MUCH faster than GM did in 1915. I anticipate that growth will be 50 percent faster than the company's conservative growth projection... look at Apple from the iPod to iPhone growth... Tesla need to worry about rapid expansion and distribution logistic than demand. I think they already got consumer acceptance this year. Last year was their proving ground year to demonstrate they can be an auto maker of large size. The risk for investor is over. It is up from here and the pace is all up to Tesla to scale quickly as possible. I will not be surprised that by end of next year they make about 80k to 100k model s and x together. If Elon can move the gen iii one year earlier, Tesla's stock will rocket to $50 billion market cap in 2 years. Then add another mid range auto, the stock will move to $100 billion cap. I think Elon has big plan for Tesla tech to be the standard in the auto world and also Tesla will move into other forms of new transportation like hyper loop, robotics delivery vehicles, etc... Tesla will not be your auto maker of the past. It will be a transportation company of the next century.

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